Transocean (NYSE:RIG), which owned the Deepwater Horizon oil rig which was operated by BP (NYSE:BP) at the time of the explosion in the Gulf of Mexico, is in talks with Shell (NYSE:RDS-A), Anadarko (NYSE:APC), BHP (NYSE:BHP over force majeure, or otherwise known as 'Acts of God,' as the Obama administration refuses to allow any new permits in the region.
Although the Obama administration has dropped the oil moratorium in the Gulf, that was largely symbolic, as they effectively have it in place by not allowing the permits to be approved.
Consequently, Transocean is scrambling to renew force majeure contracts with the companies mentioned above so they aren't cancelled completely. They expired at the end of November.
The companies agreed with Transocean to continue the contracts for a reduced lease rate after the Gulf accident. Together they represented revenue of $1.58 million a day for Transocean.
Force majeure provides an out for a contract if events beyond the control of a company prohibits them from using a rig.
A minimum of five deepwater drilling rigs are going to or have left the Gulf of Mexico since the ban.
Showing posts with label Force Majeure. Show all posts
Showing posts with label Force Majeure. Show all posts
Thursday, December 2, 2010
Tuesday, October 19, 2010
Transocean (NYSE:RIG): Light at the End of the Tunnel?
Based on a couple of assumptions, Natixis Bleichroeder said Transocean (NYSE:RIG) may be out of the woods, upgrading the company to "Buy."
"In our previous update for Transocean, we had assumed lower dayrates for deepwater rigs drilling in the U.S. Gulf of Mexico based on uncertainties surrounding the Macondo incident. With the end of the deepwater moratorium, renegotiations on most contract disputes, and lack of successful force majeure proceedings, we believe that most contracts will be honored at their original contracted dayrates. Assuming BP (NYSE:BP)honors its contractual indemnity with RIG, and based on Transocean's history as a premiere offshore driller, we believe that RIG is likely “out of the woods,” said Natixis
The market seemed to agree with them Monday, as Transocean closed at $68.38, gaining $1.30, or 1.94 percent. Volume for the day was 5,242,999, down from the 3-month daily average of 8,361,270.
"In our previous update for Transocean, we had assumed lower dayrates for deepwater rigs drilling in the U.S. Gulf of Mexico based on uncertainties surrounding the Macondo incident. With the end of the deepwater moratorium, renegotiations on most contract disputes, and lack of successful force majeure proceedings, we believe that most contracts will be honored at their original contracted dayrates. Assuming BP (NYSE:BP)honors its contractual indemnity with RIG, and based on Transocean's history as a premiere offshore driller, we believe that RIG is likely “out of the woods,” said Natixis
The market seemed to agree with them Monday, as Transocean closed at $68.38, gaining $1.30, or 1.94 percent. Volume for the day was 5,242,999, down from the 3-month daily average of 8,361,270.
Monday, July 19, 2010
Transocean (NYSE:RIG) Reduces Rig Rate for BHP (NYSE:BHP), Shell (NYSE:RDSA)
Transocean (NYSE:RIG) came to an agreement late last week with Royal Dutch Shell (NYSE:RDS-A) and BHP Billiton Ltd. (NYSE:BHP) to reduce the day rate on oil rigs operating in the Gulf of Mexico, in light of the misguided moratorium by the Obama administration.
The two companies will pay what is described as a "special standby rate that is lower than the regular contract day rate." As a result, the two companies won't be allowed to declare "force majeure," and instead will have their contracts extended by one day for each day they aren't allowed to drill in the Gulf because of the moratorium.
Force majeure allows companies from having to fulfill their contract obligations under extreme circumstances like faced in the Gulf oil spill.
On the part of BHP, if they aren't able to secure a drilling permit after November 30, when the moratorium ends, they can end the contract or continue paying the special rate. When operations resume, Shell and BHP will begin paying the regular rates again.
Eni SpA (NYSE: E) and Chevron Corp. (NYSE:CVX) have already declared force majeure on several rigs on drillships provided by Transocean.
The two companies will pay what is described as a "special standby rate that is lower than the regular contract day rate." As a result, the two companies won't be allowed to declare "force majeure," and instead will have their contracts extended by one day for each day they aren't allowed to drill in the Gulf because of the moratorium.
Force majeure allows companies from having to fulfill their contract obligations under extreme circumstances like faced in the Gulf oil spill.
On the part of BHP, if they aren't able to secure a drilling permit after November 30, when the moratorium ends, they can end the contract or continue paying the special rate. When operations resume, Shell and BHP will begin paying the regular rates again.
Eni SpA (NYSE: E) and Chevron Corp. (NYSE:CVX) have already declared force majeure on several rigs on drillships provided by Transocean.
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